Japanese Tech Stock Weekly Update

The following is excerpted from IRG's weekly stock report:

Internet

• Industry sources noted that a series of Japanese popular video games, which include Namco, Sega, Konami, Koei, SNK are raising their attack against the South Korean online game market. According to the industry, major game companies in Japan are developing online releases of their own games with South Korean companies or acquire a contract to publish in South Korea. The government and the industry are required to take measures over the excessive rise of payments for copyright and the bad effect on the local online game market as South Korean major game companies rush at every joint project for games with name value or high popularity. 'Katamari Damacy' series for PS2 and PSP developed by Namco is to appear in the domestic online game market soon. It is known that Namco is negotiating many conditions with W.N.C companies in Korea to develop 'Katamari Damacy Online. Currently, 'Shenmue' of Sega and 'La Frontera' of Koei are games that tried to develop as online games, but they did not become hugely popular. Immature localization depending on their name values and conflicts on development are counted for the main causes. But, new projects under process are well prepared and enthusiasm of South Korean companies makes them different from before. Japan companies began to see the domestic market as a touchstone for future business.

• The Japanese government through its Ministry of Internal Affairs and Communications announced its plans to enable high-speed Internet access via existing power lines instead of telephone or cable TV lines. The ministry said it will revise a ministry regulation and start accepting applications for the Internet access known as power line communications within this year. The Radio Regulatory Council recommended the lifting of a current ban on power line communications. In the planned service, power lines at home will be used as a local area network by attaching special modems to power outlets. The system is expected to be capable of transmitting information at a speed equal to that of data communications via fiber optics. Manufacturers of electric appliances, electric power companies and telecom operators have shown strong interest in developing the technology as it enables easy high-speed Internet access as well as remote-control of electric appliances at home via personal computers outside the home. Many amateur and professional radio operators, however, are opposed to lifting the ban on power line communications, as there is a possibility that they may leak radio waves and disrupt existing radio communications.

• eBook Initiative Japan Co., an electronic books distributor, announced its new offer to distribute Japanese "manga" comic books via an Internet portal site in Singapore. The company said the service will initially offer 30 titles, with the number of tiles will be increased to 50 by the end of the year. The new service will be handled jointly with two Kyocera Corp. (KYO) group firms – Kyocera Communication Systems Co. in Tokyo and Kyocera Communication Asia Pacific Pte. in Singapore. In order to read the manga, customers will have to use special software.

• Softbank Corp. (SFTBF) announced that it has begun offering an Apple Computer Inc. (AAPL) iPod nano packaged with one of its own mobile phones. The company said the new promotion is designed to keep customers for at least two years as Softbank would require them to refund the cost for the handsets if they cancel their subscription within the period. Softbank is offering one of its cell phone models made by Sharp Corp. together with the new 2 gigabyte iPod nano, which Apple unveiled. Apple sells the new iPod model for US$151. The price of the package is different at each retailer and Softbank could not provide a specific figure. Industry sources indicated that Japanese operators typically offer hefty subsidies to retailers to bring down cell phone prices, and earn back the cost over time through monthly fees. The new sales scheme allows Softbank to bring down the price of handsets while lightening the impact of the subsidy costs on short-term earnings.

• According to the Ministry of Internal Affairs and Communications, the number of subscriptions to asymmetric digital subscriber line [ADSL] services totaled 14.4 million at the end of June, down 0.2 percent from three months earlier, which was the first quarterly decrease. Industry experts said the decline shows the increased demand for fiber optics services capable of offering greater-capacity broadband Internet communications services. The number of subscriptions to fiber optics services increased 15.5 percent from the end of March to 6.3 million, reflecting the expansion of fiber optics networks, with 79.7 percent of households in Japan having access to fiber optics services as of the end of March.

• The country’s most popular online community site Mixi Inc. made an impressive performance on the Tokyo Stock Exchange with buy orders overwhelming sell orders and bids indicated 57 percent higher than its pre-market price. Raising some US$93 million in its IPO, Mixi is expected to attract more users and advertisers as it grows, and investors say the stock is attractive to both retail and institutional investors. Mixi operates the nation's largest social network site [SNS], used by some 5 million people to chat, post blogs and create message boards to communicate with people who share similar interests. It is seen as the country’s answer to MySpace.com site in the U.S.

Mobile/Wireless

• eAccess Ltd. said its wireless unit will borrow its rival NTT DoCoMo Inc.'s (DCM) network to offer a nationwide cell phone service. Under the agreement, eAccess' mobile unit will roam on DoCoMo's network in areas outside the major cities of Tokyo, Osaka and Nagoya. Observers see the agreement as helping eAccess launch a nationwide voice service in March 2008 before completing its own network. eAccess is building 3G wireless infrastructure with suppliers Ericsson (ERICY) and Huawei Technologies Co. across Japan. eAcccess said it aims to have its own network deployed by the end of its roaming contract with DoCoMo in Oct 2010. Prior to the nationwide mobile phone service, eAccess aims to offer wireless data services in March 2007.

Media, Entertainment and Gaming

• Neowiz’s Japanese subsidiary, Neowiz Japan, said it will be showcasing its new games at the Tokyo Game Show to be held late this month. Neowiz Japan will show fantasy game Monato Esprit, Dekaron and music racing game, R2Beat. Neowiz Japan opened its game portal, Gamechu, in April this year. An official at Neowiz Japan said that the company aims to enhance Neowiz Japan's brand image in Japan through the game exhibition.

Hardware

• Sony Corp. (SNE) said its revealed plans to will launch a DVD recorder using Blu-ray technology by the end of the year in Japan, a move that is seen as strengthening its lineup of high-definition optical disc products. Sony, which promotes the Blu-ray format in competition with the HD DVD standard led by Toshiba Corp., did not give details such as a launch date, price or overseas release dates. The company said it currently offers a Blu-ray drive in its VAIO computers and will be selling Blu-ray players in the United States in October. It also plans to roll out its PlayStation 3 game console, which is equipped with a Blu-ray player, in November in Japan and North America. A shift to the new generation of DVD discs and machines is expected to help boost sales at Sony.

Semiconductors

• IBM Corp. (IBM) said it has started shipping its microprocessors for game machine manufacturer Nintendo Co.'s Wii next-generation console. IBM said the chips use technology that will help Nintendo deliver a large improvement in processing power while achieving a 20 percent reduction in energy consumption. IBM has so far provided its chips to Microsoft Corp.'s (MSFT) Xbox 360 and Sony Corp.'s soon-to-be-released PlayStation 3. Nintendo (NTDOY.PK) said it plans to ship the Wii in the fourth quarter of this year.

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